What is Maritime Economics?

Nathan Waller



Have you ever been on a cruise? One of the most striking things about them is the number of moving parts needed to keep the show ticking over. Just think about dinner. The largest passenger ship in the world, the Symphony of the Seas, can carry 6,680 passengers (Helvar, n.d.). If each of them has a main course and a dessert, collectively these holidaymakers will consume 13,360 plates of food, all of which has to be sourced, stored, ordered, prepared, cooked and delivered every single evening. This is all done by an army of chefs, waiters, port workers, lorry drivers, farmers and others.


Catering is one example of a logistical challenge the maritime industry faces but there are many others. There are also other types of problems in the sector that economics has something to say about. A ship’s size, ports of call, and onboard facilities are all variables resulting from optimization problems. So, it should not be surprising that there is a branch of economics that studies such topics, even though it is seemingly more focused on freight. To investigate this branch of knowledge, we review research by Shuaian Wang, Theo Notteboom and Kevin Cullinane, three of the four best researchers in the field according to Chang et al. (2018).


Home to thousands of people, passenger ships create a lot of waste, much of which has to be stored and disposed of on land. Only so much waste can be held at any one time and the price of waste disposal varies from port to port. So, shipping companies want to dispose of waste in the cheapest places but cannot let the amount of garbage exceed their ability to store it. Wang et al. (2018) laid out a method of solving this optimization problem in four different situations. The two most interesting cases involve a random amount of waste being created each day. They differ in that one of them assumes the same ports are used each time an itinerary is repeated and the other does not (this case can also incorporate changing itineraries). The author’s testing suggests that their algorithm can find cheaper ways to dispose of waste than simply doing it when the ship has insufficient capacity for the next leg of the journey. The paper also presents evidence that having a dynamic process where different ports can be used during each repetition of an itinerary reduces the costs of waste disposal by about a third compared to always dumping waste at the same ports.


Pivoting to look at cargo, Notteboom et al. (2021) wrote a paper comparing the impacts of COVID-19 and the Financial Crisis on the maritime industry. Two of the authors’ points are especially interesting. Firstly, shipping companies were more able to respond to changes in demand during the pandemic than there were during the financial crisis because they had more flexibility. In 2008 the EU changed monopoly rules to prevent companies from cooperating to manage capacity and this caused inefficiencies. However, a consolidation of the shipping market, including a mergers and acquisitions spike from 2014-2017, helped prevent a similar thing from happening when the COVID crisis hit.


Secondly, there was a need for “rebalancing empty container flows” (p.197). Hummels (2007) estimated that containers have reduced shipping costs by up to 13.4% partially because, once packed, they don’t need to be continually unpacked and repacked as the cargo moves from one mode of transport to another. This reduces port costs through saved time and effort (Levinson, 2006 in Hummels, 2007). Whilst not new (Shipsta, 2021), the scale of the empty container problem during the pandemic highlights one of the disadvantages of containerisation.


The last paper, Saeed et al. (2020), co-authored by Cullinane, tries to predict the impact on global trade of China’s Belt and Road Initiative. The BRI is a program aiming to improve China’s trade links with the rest of the world. The authors use a gravity model to predict what effect it will have on world trade. Specifically, they look at the more direct routing of containers and suggest that the BRI will likely increase productivity and this will show up in bilateral export values.


To conclude, by looking at three studies co-authored by prominent maritime economists, we have introduced their field and got a flavour of what kind of questions these academics investigate. We have seen research into optimisation problems, the impact of COVID and how investment in maritime infrastructure might impact global trade. Clearly, this field is broad and quite applied, even if it uses fairly technical means of analysis. To answer our overarching question then, maritime economics is what it says on the tin, “the economics of shipping”.


References

Chang, Y.T., Choi, K.S., Jo, A. and Park, H. (2018). Top 50 authors, affiliations, and countries in maritime research. International Journal of Shipping and Transport Logistics, vol.10, no.1, pp.87-111.


Helvar (n.d.). Symphony of the Seas, viewed 18 August 2021, <https://helvar.com/case-studies/marine/symphony-of-the-seas/>


Hummels, D. (2007) "Transportation Costs and International Trade in the Second Era of Globalization." Journal of Economic Perspectives, 21 (3): 131-154.


Notteboom, T., Pallis, T. and Rodrigue, J.P. (2021) Disruptions and resilience in global container shipping and ports: the COVID-19 pandemic versus the 2008–2009 financial crisis. Marit Econ Logist 23, 179–210 .


Saeed, N., Cullinane, K., Gekara, V. and Chhetri, P. (2021). Reconfiguring maritime networks due to the Belt and Road Initiative: impact on bilateral trade flows. Marit Econ Logist 23, 381–400.


Shipsta (2021). What is Empty Container Repositioning (and What Causes It)?

s, viewed 19 August 2021, <https://blog.shipsta.com/en/empty-container-repositioning>


Wang, S., Zhen, L. and Zhuge, D. (2018). Dynamic programming algorithms for selection of waste disposal ports in cruise shipping. Transportation Research Part B: Methodological. 108. 235-248.